Boring Data

“The eurozone economy is booming,” IHS Markit’s Chief Business Economist, Chris Williamson, said Wednesday, in the color accompanying flash PMIs for June.

In a tentative sign that the transatlantic economic divide may be on the verge of narrowing, economic activity expanded at the fastest pace in 15 years early this month, Markit’s surveys suggested.

The flash print on the bloc’s composite gauge was 59.2 (figure below), up from 57.1 in May. It was the highest read since June of 2006, and the fourth consecutive month of expansion.

Europe, you’re reminded, slipped into a double-dip recession in the first quarter amid a fraught vaccine rollout and virus restrictions across the bloc’s largest economies.

IHS Markit said businesses cited “surging demand, with the upturn becoming increasingly broad-based, spreading from manufacturing to encompass more service sectors, especially consumer-facing firms” in June.

“Overall, the PMI confirms a picture of accelerating growth over the course of Q2 as restrictive measures are eased,” ING wrote. “We expect growth to accelerate in Q3 before it levels off a bit, but overall our base case is one for strong converging growth numbers across the eurozone in 2021.”

That’s all good news, of course. Germany, the bloc’s largest economy, led the charge. The nation’s manufacturing PMI printed 64.9 in the flash read. The services PMI rose to 58.1. At 60.4, Germany’s composite PMI sits at a 123-month high. The new orders gauge touched the highest since January 2011.

“Supply shortages still remain widespread, but a fall in the number of goods producers reporting longer lead times and rising material prices are perhaps the first signs that the worst of the disruption has now passed,” IHS Markit’s Phil Smith said, of the German survey, adding that “price pressures have continued to heat up across the economy as a whole, however, owing in part to a record surge in service sector costs as higher material prices continue to spread from manufacturing and firms report a pick-up in personnel costs.”

In France, both the services and manufacturing gauges missed estimates, with the latter coming in well short at 57.4 versus 59.5 expected. Still, the outlook is bright. “Strong back-to-back months of output growth are exactly what we expected to see following the peel back of additional lockdown restrictions this month,” another IHS Markit economist said, commenting on France’s surveys. “It means the French economy has enjoyed its best quarterly performance since early 2018.”

Things are a bit more tenuous in Japan, though. Although manufacturing activity expanded a fifth month in June, services sector activity contracted again. The services gauge hasn’t been above the 50 demarcation line since the onset of the pandemic (figure below).

“Panel members commonly associated disruption to operating conditions to ongoing COVID-19 restrictions, coupled with severe supply chain pressures, notably for manufacturers,” the Japan survey said.

Although businesses remain “optimistic,” things could be better. As Bloomberg wrote Wednesday, the Olympics “are likely to provide a much smaller economic boost than they would have otherwise because spectators from overseas will be barred from events and the number of domestic fans has also been capped.”

Obviously, the above doesn’t make for the most compelling reading. PMIs aren’t known to elicit adrenaline rushes. If Vincent had stabbed Mia with a syringe full of flash PMI data in Pulp Fiction, she wouldn’t have woken up.

But market participants (and especially would-be macro mavens) have an amusing habit of claiming to know a lot about everything while harboring a (sometimes unspoken) aversion to data and especially to anecdotal accounts and any kind of reading.

It’s true that the data isn’t always worth analyzing, especially when it’s of the “soft” variety. But too often, macro folk excuse laziness by reference to “instincts” or other intangibles. They’ll eschew mundane, monthly data in favor of refreshing a chart of some currency pair they swear is the leading indicator for damn near everything.

“All I need is this Aussie cross, the copper-to-[something] ratio and a socket wrench. Oh, and other people’s money. I need that too.”